A closer look shows that the conventional wisdom that Japanese firms, when it comes to FDI outflows, are in a 'China-1' situation (the perceived phenomenon that foreign firms have concentrated too much of their FDI and production networks in China and that, to diversify risk, they are looking to a '-1' country in Southeast Asia) is not accurate. Except for the years of 2003-4, where China's share of Japanese FDI in Asia was well over half, China's share has remained quite stable.

In the last decade, the biggest move is the rise of Vietnam and India as FDI destinations and the continued strength of Southeast Asia as a destination. In 2008, India and Vietnam attracted more Japanese FDI than China. In 2011, Indonesia, the Philippines, Thailand and Malaysia together attracted more Japanese FDI than China despite being collectively much smaller in GDP and population terms.

So although there is growing Japanese FDI in the rest of Asia, this hasn't come at the expense of China. It is better to think of Japanese FDI as an 'Asia-China' story, with the boundaries of Asia shifting westwards.